How Your Money Looks May Affect Your Spending Habits

A recent study posted on ScienceDaily.com has discovered an interesting and often unconscious habit--people do away with old, crumpled bills faster than they do with clean, crispy ones. Researchers from the University of Guelph in Canada have found that this behavior affects how and when money is used.

Professor Theodore Noseworthy of Guelph’s Department of Marketing and Consumer Studies, together with study co-author Fabrizio Di Muro of the University of Winnipeg, and his team of researchers did five trials where different groups of people were given both old and new bills and were asked to spend them. All trials showed that old bills were let go faster than new bills, simply because they looked like they’ve passed hands too often for comfort, making them "dirty."

"We tend to regard currency as a means to consumption and not a product itself. In other words, it should not matter if it's dirty or worn because it has the same value regardless. But what we show is that money is indeed a vehicle for social utility, and that it's actually subject to the same inferences and biases as the products it can buy," Prof. Noseworthy explains.

Interestingly, the behavior changed when the participants spent the money in front of other people. They used newer bills as if to show them off, going to lengths of paying more small but crispy bills than just using one big but crumpled denomination.

Although this tidbit of information may seem mundane, try watching yourself and the way you spend. Do you pull out your older bills easier than newer ones? You may be spending more than you initially planned to. Remember that money, no matter how crumpled, is still money. Respect its value. Once you do so, learning to properly budget what you have will be a breeze.